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SECURITIES AND EXCHANGE
COMMISSION
LITIGATION RELEASE NO. 14650 / September 22, 1995
SECURITIES AND EXCHANGE COMMISSION v. ELLIS L. DEYON,
BRADLEY T.
GULLETT
(INDIVIDUALLY, AND D.B.A. "GULLETT &
ASSOCIATES"),
WILLIAM HANKE, DOVE INVESTMENT GROUP, INC., AND SHERWOOD
H. CRAIG
(United
States District Court for the District of Maine,
Civ. Action No. 95-0164-B). The Securities and Exchange Commission announced that on
September 21, 1995, it achieved repatriation of approximately
$400,000, which represents all funds held in a Mexican
bank account
in the name of defendant Ellis L. Deyon. The Honorable
Morton A. Brody, U.S. District Judge for the District
of Maine,
had ordered repatriation of
all funds any defendant had
transferred
outside the United States, as part of the preliminary
relief obtained by the Commission when its action was
filed on
July 25, 1995. The Commission
alleged that each of the
defendants
was participating in an ongoing fraudulent offering
of securities in violation of the federal securities laws
by soliciting investors to place
money in a "special inversion
account" in Mexico with the promise of annual returns of up to
300%.
The Commission
has alleged that the defendants raised
several
hundred thousand dollars from investors in Maine, Pennsylvania, Texas, California, Florida and perhaps other
states. These funds were then transferred to a bank
account in
Mexico
under the control of defendant Deyon. Almost $400,000
was in defendant Deyon's account when repatriated. The Commission
acknowledges
the assistance of the Comision Nacional de Bancaria
y Valores of Mexico, which regulates banking and securities
activity,
and worked with the Commission's Office of
International Affairs to assist in accomplishing the
repatriation. The repatriated funds have been placed
in the
registry of the court.
The Commission's Complaint in the case alleges that,
beginning no later than mid-May 1995 and continuing
at least
until the filing of the Commission's
Complaint, the defendants
fraudulently
induced members of the public to invest with them
by promising to pay a virtually risk-free annual return
of up to
300%. According to the Complaint,
the defendants represented
that
they could pay such extraordinary rates of return
because
the proceeds of the investment sales would be deposited
into a
"special"
Mexican bank account they control which they claimed
generates investment returns or earns interest of approximately
1020%
per year. The Commission also alleged that, in
some instances, the defendants told investors and potential investors
that the account would be
used to engage in the trading of
instruments
referred to as "Prime Bank" securities.
The Complaint
alleges that, contrary to the Defendants'
representations to investors and potential investors, the bank
account into which the proceeds of the investment offering
were deposited
does not earn the extraordinary rate of return described, the investments involve an extraordinary amount
of risk, and the existence of legitimate
financial instruments known
as
"Prime Bank" securities is nothing more
than a hoax. Moreover, the Commission alleges
that at no time relevant hereto
has any of the defendants been registered with the Commission
as securities broker-dealers
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or associated with such a broker-dealer as they were required
to be.
The defendants
allegedly targeted persons active in
evangelical
Christian ministries of which the defendants purport
to be devout followers. According to the Complaint,
many of the
investors
and potential investors solicited by the defendants
are of modest economic means and are unsophisticated and
inexperienced in financial matters. The defendants allegedly
encouraged potential investors
to take extraordinary steps to
obtain money to invest including obtaining second mortgages on
their residences and procuring large cash advances against
their credit
cards.
On August 17,
1995, the court entered a Preliminary
Injunction
and Order to Continue Asset Freeze and Other Relief
("Order") preliminarily enjoining ELLIS L.
DEYON (of Saltillo,
Coahuila,
Mexico), BRADLEY T. GULLETT (of Maitland, Florida),
WILLIAM HANKE and DOVE INVESTMENT GROUP, INC. (of Davenport,
Florida)
and SHERWOOD H. CRAIG (of Orono, Maine) from continuing
their fraudulent offer and sale of securities. The Order
also continues
a freeze of certain assets originally entered
by the
Court on July 25, 1995, and grants other relief. The
Court entered the Order upon a motion
by the Commission and the consent
of the defendants.
The Commission
alleges that the defendants' offering and
selling activity violated the antifraud and broker-dealer
registration provisions of the federal securities laws
- i.e.,
Section
17(a) of the Securities Act of 1933 and Sections
10(b) and 15(a) of the Securities Exchange Act of 1934 and
Rule 10b-5
thereunder.
In its Complaint, the Commission seeks the following
ultimate relief: (i) permanent injunctions prohibiting
the commission
of further violations of the antifraud and broker-
dealer registration provisions of the federal securities
laws; (ii)
disgorgement of the defendants' ill-gotten gains
plus prejudgment interest thereon; and (iii) civil monetary
penalties
in
an amount to be determined by the Court. Discovery
is currently proceeding in the case, which is scheduled
for trial in
April,
1996.
For further information,
please see Litigation Release Nos. 14586 and 14610.
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